# Du Pont v. Du Pont

> Court of Appeals for the Third Circuit · March 6, 1919 · 256 F. 129

URL: https://www.frixlaw.com/law-library/cases/8811001

## Case

- **Full name:** DU PONT v. DU PONT
- **Court:** Court of Appeals for the Third Circuit
- **Decided:** March 6, 1919
- **Citations:** 256 F. 129; 167 C.C.A. 345; 1919 U.S. App. LEXIS 1345
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Buffington
- **Judges:** Buffington, Haight, McPherson
- **Cited by:** 29 later opinions in the Frix Law Library

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## Opinion text

BUFFINGTON, Circuit Judge.
In the court below, Philip F. Du Pont, a citizen of Pennsylvania, filed a bill against the E. I. Du Pont de Nemours Powder Company, a corporate citizen of New Jersey, hereafter called the Powder Company, and 2 corporations and 13 individuals, corporate citizens of Delaware. Proofs were taken, and after final hearing the court entered a decree 'dismissing the bill. Thereupon the plaintiff took this appeal.
The hill was filed by Philip F. Du Pont, as a stockholder of the Powder Company, for and on behalf of himself and such stockholders as might intervene, and its purpose was to enforce a right of action alleged, to be in the Powder Company, against the 13 individuals named, and which right of action the Powder Company woirld not maintain, because it was under the domination of said defendants, or some of them. It will thus be seen that the real plaintiff in the cause is the Powder Company, and the real defendants are the other defendants, who, as is alleged, are liable to the Powder Company on the cause of action which Philip F. Du Pont here seeks to enforce. We shall therefore treat the case as, in reality, one brought by the Powder Company against these other defendants.
[1 ] Such being the real status of the case, our first inquiry naturally is: What is the alleged cause of action of the Powder Company against these individuals? In that regard the individuals may be grouped in two classes: One composed of six men, to wit, Raskob, who was treasurer of the Powder Company and a director, Carpenter, a director, and four Du Ponts, viz. Alexis, Irénée, Lammot, and Pierre, all of whom were directors as well as administrative officers of said company. These six men, hereinafter called the syndicate, bought the stock of the Powder Company, hereinafter called the Coleman stock. The second class is the Du Pont Securities Company, hereinafter called the Security Company, a Delaware corporation formed by the syndicate for the purpose of financing the purchase and thereafter holding the Coleman stock after its purchase by the syndicate. The third group is composed of Harry' F. Brown, William Coyne, Harry G. Hoskell, John P. Laffey, and the two Du Ponts, Eugene and Henry F., all of whom were directors of said company, and who, as well as the syndicate memhers, acquired from the syndicate shares of stock in the Security Company above referred to.
Turning first to the right of action of the Powder Company against the members of the syndicate, we note that in February, 1915, John J. Raskob was the treasurer of the Powder Company, and as such treasurer, and generally under the directions and contract of the board *131 of directors and its finance committee, had charge and control of the deposits of the Powder Company. Raskob was also a director of the company. At that time Coleman Du Pont owned 13,899 shares of preferred and 63,214 shares of its common stock, about one-fifth of the total issue. On February 13, 1915, he wrote the following letter to Pierre S. Du Pont, one of the defendants:
“Dear Pierre: I sot a little too gay last week, and have been on the ‘blink’ for live or six days, but am getting along all right now.
“The more I have thought of (he slock question, the more T believe, with what little information A have, that the common stock should reach 200 and may reach 300. If this is true, the men who are now at the helm and actually doing things should make the profit as between to-day’s figure and that figure; it will be by far the best thing that can happen to the company. So clear I am that this is the right time to get them interested that I am willing, figuring as surely as I can that this stock will go much higher, to let go for the benefit of the men who are working, which, of course, moans the benefit of the company, 20,000, 30,000, or even 40.000 shares at to-day’s market which I assume is about 200. As to the details of working this out I am entirely willing to leave this to you and Lew.
“If much time is desired, the price should be higher. If the arrangement for cash payment is made through hanks, there should be no increased price. In. order to get time when we purchased the company originally, what we gave to be allowed time amounted to, I believe, over 100 per cent, increased price, this because the element of chance must necessarily come in.
“Of course, I am only using my best judgment in this matter, but I am willing and strongly urge that the heads of departments and younger members of the family become most Interested in the common stock.”
This letter was shown to Raskob by Pierre Du Pont on February 17th, and what follows is thus stated in his testimony by Raskob;
“Mr. I)u Pont handed me this letter, and said to read the letter over, and he would like to talk with me about it. I did read the letter over, and later in the day had a conference with him. We talked over (lie matter of the purchase of certain shares of common stock, from Mr. Coleman Du Pont. Later on Mr. Iréiiéo Du Pont, Mr. Lamniot Du Pont, Mr. Carpenter, Mr. Pierre Du Pont, and I had a conference. I think Mr. Felix Du Pont was not at that conference, but was at a later one. The result of those several conferences was a decision that six of us would endeavor to purchase a substantial block of Mr. Coleman Du Pout's stock, and we directed that a telegram be sent lo him through Mr. L. L. Dunham, liis secretary, to ascertain whether Mr. Coleman Du Pont would be willing to poo! the voting of the balance of his stock, in case we bought a portion of It. The reply that Mr. Dunham gave us was that Mr. Du Pont was unwilling to commit himself to pooling the vote, as I recall it. That resulted in our inquiring as to whether he would be willing to sell bis total holdings, to which he replied he would. These negotiations were, of course, conducted through Mr. Dunham. We then sent a telegram to Mr. Coleman Du Pont, making him an offer for his entire iireierred stock holding at $80 per share.”
On receipt of Coleman’s offer to sell, Raskoh, on behalf of the syndicate, on February 19, 1915, went to New York to see Morgan & Co., and ascertain whether they would furnish the money, over and above the amount they could get Coleman Du Pont to take notes for, which would be necessary to buy the Coleman stock. Morgan & Co. having agreed to do so, Raskob told Pierre Du Pont that night what he had done in New York, and the next day the syndicate met in Wilmington and determined to buy all of Coleman’s stock, in pursuance of which telegraph and phone messages were exchanged that day *132 between Coleman Du Pont and Pierre Du Pont, whereby the former agreed to sell and Pierre to buy all of Coleman’s preferred stock at $85 and all his common stock at $200; $8,000,000 to be paid to Coleman'in cash, and $5,831,865 in seven-year notes.
The purchase having been arranged with Coleman, Raskob and Pierre Du Pont went to New York on February 23d, saw Morgan & Co., who, for an agreed commission of. $160,000, undertook to furnish the $8,000,000 cash required to pay Coleman. Papers were thereafter drawn in fulfillment of this arrangement, and on March 2d Ras-kob and Pierre Du Pont again went to New 'York and closed the $8,000,000 loan arrangement made with Morgan & Co., and delivered to the Bankers’ Trust Company — which Morgan & Co..had designated to do the financing, trusteeship, etc., of the matter — the stipulated security, and received in return the $8,000,000 Morgan & Co. had agreed to furnish.
Without now entering into details of the preceding matters, the outcome was that the Coleman stock was acquired by the Security Company and the stock of the Security Company was held by the syndicate. On behalf of the plaintiffs, it is contended that the acquisition of this stock by the syndicate was in fraud of the Powder Company, was in violation of their several duties as its officers, and that the purchase was effected by the syndicate members taking an unfair and unlawful advantage of their position as officers and by an- unfair and unlawful use of the credit, good will, and money of the Powder Company. Standing aside for the present, Pierre Du Pont, as to whom there are individual facts and circumstances hereafter discussed, and confining ourselves to the other members of the syndicate, Raskob, Carpenter, Alexis, Irénée, and Rammot Du Pont, let us inquire whether, as officers of the company, the proofs establish they have, in the purchase of the Coleman stock, been guilty of wrongdoing.
In the first place, it will be noted that Coleman Du Pont was the president of this company, and his ownership of this large block of stock had never been considered as a menace to the company. Of Coleman’s right to sell to any officer of the company, and of the right of any officer of the company to buy such stock, there can be no question, and unless, therefore, some facts exist which make it inequitable as against the Powder Company and its stockholders for such officers to buy said stock, it is clear that there was no inequity, per se, in these five defendants buying this Coleman stock. Por example, the proof shows that the next largest stockholders of the Powder Company were Alfred Du Pont and William Du Pont. Both were directors, vice presidents, and members of the executive committee. Now, it is clear that, if Coleman had made his offer of February 13th to Alfred Du Pont singly, or to Alfred and William jointly, their official relations to the Powder Company would not have prevented them singly or jointly buying Coleman’s stock, although such purchase would have given him or them the potential power incident to such increased stock ownership.
We use this simply to emphasize the position that the fact of the syndicate buyers of this Coleman stock being officers of the Powder *133 Company did not,, per se, qualify or take away the right officers of any company have to buy, in large or small quantity, its stock. It is manifest, iherefore, that disability on their part to buy the stock must be found, if it exists, in the fact that they made some wrongful use of their position or influence as officers, or such wrongful use, of the money, property, or credit of the company, as made it inequitable for them to acquire and hold stock which the company should hold or wished to buy for itself; or, to put it in another form, the facts of their being officers of the company and their had faith as officers in buying the stock were such as to warrant the court in decreeing them trustees ex maleficio of the stock, and therefore liable to turn the stock over to the company, if it so desired. Do the proofs measure up to that standard?
[2] Now, it is quise apparent that, if the five officers whom we are now considering had had the money to have paid Coleman Du Pont cash for his stock, or if, instead, of Coleman accepting notes for substantially six-thirtieths of this stock, he had taken their notes for the whole of the purchase money, there could have been no just charge made of any fraud, bad faith, or breach of duty on the part of these five men, for, so far as those five are concerned, there is no evidence whatever of anything which, at the date Coleman made his offer, qualified their right to buy his stock. And so far as Coleman Du Pont and nearly $6,000,000 of this purchase money, this was just what this syndicate was able to do and did do without in any way making use of the credit of the company, or in any way using or misusing their position ns officers. And in point of fact the security Coleman took and extended over seven years was not only on a lesser margin of stock depreciation, but his notes were not secured hy the personal guaranties of the syndicate members, which, as wé shall see, were given to Morgan & Co. in the case of the remaining $8,000,000 of the purchase money.
We next turn to the steps taken and the notes given by the syndicate, from the proceeds of which were raised the $8,000,000 cash paid to Coleman for his stock; in raising this sum, was the credit of the Powder Company used, or was any misuse made by any of these five men of their official relation to the company? While, of course, they are to he held responsible for what was done by each member or members of the syndicate in their behalf, we are relieved from any detail discussion of the proofs, so far as four members of the syndicate, viz. Carpenter and Alexis, Irénée, and Rammot Du Pont, are concerned; for as to them there is no proof of their personally taking any part in obtaining the $8,000,000 through Morgan & Co.
Assuming, however, that they are responsible for the acts of Raskob and Pierre Du Pont, who acted in their behalf in getting the $8,000,-000, we turn to the proofs of what was done hy Raskob and Pierre Du Pont in getting this $8,000,000 of purchase money. Was the credit of the Powder Company used by Raskob and Pierre to obtain the $8,000,000 in New York? Did Raskob or Pierre misuse their official connection with the company to obtain this loan? In this inquiry we note that the arrangement for the loan was made by Raskob; *134 he alone visited New York, made all the arrangements and he was the treasurer of the company. He reported back to his fellow syndicate members. Now, Raskob was treasurer of the company; he had a general supervision of its treasury, credits, and resources; he was in a position to misuse, and if any misuse was made he was peculiarly in a financial position of trust which enabled him, above all others in the company, to make such misuse. The Powder Company was handling vast sums; the likelihood was that it would handle larger sums; the selection of depositories for those funds and the distribution of funds in the particular banks were all discretionary matters, which put it into the powers of a treasurer to so manipulate and use the funds of the Powder Company as to enable him, if so minded, to obtain personal favor and benefits from those depositories which as an individual he could not obtain.
We have no disposition to minimize or gloss over the high measure of duty incumbent on a man in such a trusted position, and knowing, as these four men, Carpenter and Alexis, Irénée, and Lammot Du Pont, did, as officers of the company, that Raskob had this potential power of wrongdoing by virtue of his treasurership, we are justified m holding these four men responsible for any misuse Raskob made of the official power they knew he had. On the other hand, if Ras-kob made no misuse of his company’s credit or his official position, we see no reason why the fact that his company trusted him should cripple his right, or the right of those associated with him, to buy stock in his own company, and thereby increase the personal interest he and they would have in increasing its prosperity.
Turning, then, to the proofs, let us inquire whether there is proof that Raskob misused, or indeed used at all, the credit of the Powder Company in obtaining the $8,000,000 from Morgan & Co. Now, the proofs affirmatively show that the only dealings Raskob had in making arrangements for the loan were with the banking house of Morgan & Co. in New York. We shall hereafter discuss the close relationship that existed between that firm and. riie Powder Company. For the present, it suffices to say that Morgan & Co. had given huge contracts for powder to the company. It knew the extent of the company’s present business and its prospective business, and in that way was well aware of the value of the company’s business and stock. As payments on these powder contracts were made to Morgan & Co. by the European governments concerned, it credited the payments to the Powder Company and notified the Powder Company of such credits, and the latter thereafter then checked out such parts of said deposits as .it saw. fit. So far as the evidence shows, the relations between the Powder Company and Morgan & Co. were that Morgan & Co. gave the Powder Company contracts for powder and far in excess of any deposits the Powder Company kept with the firm. Morgan & Co. treated the Powder Company just as it did other companies having contracts with the Allies, namely, it credited incoming payments and notified the manufacturer.
If would seem, therefore, that the relations between the Powder Company and Morgan & Co. were the ordinary ones existing with *135 other companies, that Morgan & Co. were not seeking or liable to have any favors from the Powder Company in the way of deposits, and that, if favor was to be exercised, the party that granted the favor was Morgan & Co., in giving these large contracts to the Powder Company. Moreover, the proofs are positive and uncontradicted that the arrangement made between Raskob and Mr. Porter, one of the members of Morgan & Co., was wholly and entirely on the business basis of the worth of the loan, that Morgan & Co. were paid a broker’s commission of 2 per cent, for taking the loan, and that the loan was made on the security given, and not on any present or prospective favors to be done by the Powder Company, by Raskob, its treasurer, or any other officer. In that regard, Henry P. Davison, a partner of Morgan & Co., testified:
“Q. Will you tell the court; what you took into account in making that loan and upon what credit that loan was made? A. We took into account the par-lies interest oil in the loan; that is, the personnel, and the character of the obligation, and the character of the security. Wo took into account; the character of the people who applied for the loan and the character of the collateral. * * *
“Q. Was there any other consideration or interest moving you to make that'loan than the personal character of the men who guaranteed the loan and the colla!oral which they offered? A. The terms on which the loan was presented: nothing else.
"Q. And the terms? A. Yes; nothing else.
“Q. Bid the cuestión of the Powder Company having a deposit with your firm enter into this subject in any degree? A. It did not.
“s!n the standing and reputation of the guarantors.
*‘Q. Did anything else enter into the taking of this loan besides those two things? A. No, sir.
“Q. Was the Powder Company a depositor with your bank? A. It was.
"Q. I to you recall, or can you recall, about what the deposits were; at that time? A. I have no idea.
“Q. Did the fact, of the Powder Company being a depositor in your hank affect your judgment in any way, or influence you in any way in taking this loan? A. No. sir.
”Q. Did this extension of this loan, or participation in this loan, affect the borrowing credit of the Powder Company in any way? A. No, sir.
“Q. Who brought the matter to your attention as a bank? A. J. P. Morgan & Co.
"Q. Did it, or not, come to you in any way through Pierre S. Du Pont or John J. Iiaskob? A. It did not.
"Q. Was there any promise, agreement, or understanding of any kind made by anybody in connection with this loan, with respect to deposits or maintenance of deposits in your hank? A. There was not.”
Gilbert G. Thorne, vice president of the National Park Bank, testified as follows:
“Q. Did your bank participate in this loan of $8,500,000 made to the Du Pont Securities Company of Delaware? A. Yes.
“(J. To what extent did they participate? A. $375,000.
“Q. Did you pass upon this participation? A. Yes; I took the loan.
‘•Q. Upon what did your bank extend tilia credit and take this participation in this loan? A. Upon the fact that it was presented, first of all, by J. P. Morgan & Co.,- and then by the value of tlie security as it was represented to *140 us> and then by what we were told subsequently as to the value of the indorsers or the guarantors.
“Q. Through whom did you become a participant in this loan? A. Through J. P. Morgan & Oo.
“Q. Did either Pierre S. Du Pont or John J. Raskob ask you to become a participant in the loan? A. No, sir.
“Q. Was the Powder Company a depositor with your bank? A. Yes.
“Q. Did the fact of the Powder Company being a depositor in your bank in-ijufince or affect your judgment with reference to the making of this loan? A. Not at all.”
The testimony of Robert G. Hudson, Jr., vice president of the National Bank of Commerce of New York, is as follows:
“Q. Did your bank take any part of this loan of $S,500,000, made through Morgan & Co. to the Du Pont Securities Company of Delaware? A. It did.
“Q. How much? A. $250,000.
“Q. How much did you become interested in the loan; through whom? A. J. P. Morgan & Co.
“Q. Did you become interested in it in any manner through Pierre S. Du Pont or John J. Raskob? A. No, sir.
“Q. Was the Powder Company a depositor with your bank? A. It was.
“Q. Do you know, or not, as to what the amount of deposits were at the time of this loan? A. I do not.
‘‘Q. Did the question of the deposits of the Powder Company in any manner affect your judgment or influence you with reference to this loan? A. Not at all.
“Q. Upon what did your bank extend the credit of $250,000 in this participation? A. Based on the collateral and the character and standing of the men that guaranteed it.
“Q. Was there any agreement that you heard of from anybody, with reference to deposits or the maintenance of deposits by the Powder Company in your bank, or in any of the other participating banks? A. There was not.”
And finally Richard H. Higgins, vice president of the Chatham & Phoenix National Bank, testified as follows:
“Q. Did your bank participate in this loan of $8,500,000 through Morgan & Co. to the Delaware Securities Corporation? A. Yes, sir.
“Q. To what extent? A. Our limit, $300,000.
“Q. Did you pass upon this loan? A. Together with the president, yes.
“Q. Through whom did you become a participant? A. J. P. Morgan & Co.
“Q. Did either Pierre S. Du Pont or John J. Raskob, or any of their associates, ask you to become a participant? A. No, sir.
“Q. Was the Powder.Company at that time a depositor in your bank? A. Yés.
“Q. Did the fact of the Powder Company being a depositor in your bank affect your judgment or that of the president in passing upon this loan? A. Not at all.
“Q. Was there any agreement or any understanding, expressed or implied, made anybody with reference to the maintenance of deposits in your bank as a condition or circumstance connected with this loan? A. No.
“Q. Upon what did your bank extend credit in this participation? A. On account of the collateral, the price that the collateral was put into the loan, on account of the character of the men who guaranteed the loan in their respective proportions, and on account of the fact that J. P. Morgan & Co. was handling all of the details and investigated it.”
Without citing further proofs and facts as to the intrinsic and self-recommending value of the loan, we may add that, white necessarily its worth was enhanced by the relation of the syndicate to the company, yet that enhancing value was an incident which attaches to *141 every stockholder who has a large part in the executive work of a successful company. If, for example, William Du Pont, occupying, as he did, the important place of a vice president in this company, had desired to purchase a large block of Cole-man’s stock, a.nd had offered the purchased stock as part of his security for a loan to enable him to raise the purchase money, the very fact that he was a trusted officer of the company whose stock he was buying, that he had full knowledge of its affairs, and was already largely increasing his holdings, in and of itself would naturally reassure the lender and strengthen his confidence in the value of the stock of ihe company which he was taking as security. And, indeed, the bona fide purchase of stock in a company by those concerned in its management strengthens confidence in the company, as Mr. Davison testified in this case. But this fact, in and of itself, cannot and should not preclude one active in the management of a company from buying stock in his company, from obtaining money to buy it, or compel him to forego that"additional confidence inspired in the lender by the fact that his purchase of his own company’s stock had a financial weight that the purchase of the same stock by a stranger to the company might not have.
Under the proofs in this case, we are clear that, while the value of the Powder Company’s stock was, in the nature of things, strengthened in the eyes of the lenders by the fact that these men, who were connected with the company, were purchasers, and to that extent their official position was a makeweight in the eyes of the lender, yet we are satisfied from the proofs that it was a mere incident, and not the real basis, on which the loan was made. And we are further satisfied from the proofs that the credit of the Powder Company was not used or its borrowing power diminished by the purchase of the stock or the loan which made the purchase possible. On the contrary, the proof, as we have seen, is that the purchase, instead of lessening, tended to increase, the credit of the Powder Company in banking circles. Taking the proofs as a whole, we are clear, therefore, they fail to show any reason why Raskob, Carpenter, and Alexis, Irénée, and Rammol Du Pont did not have, and were not free to exercise, the same right that any other person concerned in the management of the Powder Company had to buy stock in the company, and that in raising the funds to pay for the Coleman stock they made no use or misuse of the Powder Company’s credit or resources, or of their position as officers. Whatever may have been the facts, whether they knew of any facts, circumstances, or relations in reference to Coleman’s stock, or any part of it, or of any negotiations the executive committee had theretofore had with Coleman as to a part of this stock and to which we shall hereafter refer, certain it is that there is no proof in the case which shows that these five men, or either of them, had notice or knowledge of such matters. Such being the case, we are not only justified, but indeed constrained, to find that, so far as they are concerned, there is no proof of facts which would warrant the court, if they alone were involved, in depriving them of the *142 benefits of a purchase they had a right to make personally and did make personally.
[3] But the case does not end with, or depend on, their isolated and personal relations to the sale. Their purchase was not a purchase of segregated shares for individual ownership, hut was a joint one for a common purpose and a common ownership, and that joint purchase is now the subject of equitable scrutiny in a court of equity. And inasmuch as the syndicate was formed, the common purpose outlined, and the purchase made by Pierre Du Pont, its sixth member, and inasmuch as the individual rights of Pierre cannot well be disassociated from the other members of the syndicate, and as they have jointly united in submitting their purchase to the judgment of their fellow stockholders, as a joint undertaking, we shall consider the case on the basis of treating the syndicate as a whole, and therefore charging it with notice of all prior matters which affected the rights and equities of the Powder Company, and which were known to, or participated in by, Pierre Du Pont, the sixth member of the syndicate. Such being the test, let us examine the proofs on the basis that Pierre Du Pont alone, instead of the syndicate, was the buyer of the Coleman stock, and from that status ascertain whether, at the time Pierre made the purchase, any fact, circumstance, relation, or obligation existed which forbade his doing so; or if the purchase, when made, obligated Pierre, and enabled the Powder Company, to regard the purchase as made for it. In following this course, we adopt the suggestion of plaintiff’s counsel, who themselves have stated the issue here involved as follows:
“If a director and officer of a corporation, in tlie course of a negotiation wiili which he is intrusted, for the purchase by the corporation for a special purpose of a large poriion of the stock of one of the stockholders, receives a general offer by that stockholder to sell all the latter’s stock, can such director and officer form a small syndicate of himself and a few other officers, and purchase the stock for their own benefit, without reporting the offer to the company and giving it the opportunity to purchase?”
The answer to this question involves a study of the testimony as a whole, and to such task we now address ourselves.
In December, 1914, Coleman Du Pont was then, as we have also seen, and he continued to be on February 13th, when he made the offer which we have above considered, the president of the Powder Company and its largest stockholder, owning, at that time, all the stock, viz. 13,899 shares of preferred and 63,214 shares of common stock, which he subsequently sold to the syndicate. The proofs are that about that time Coleman went to the Mayo Hospital in Minnesota to undergo a serious operation, and the correspondence shows there were apprehensions as to its outcome. The Powder Company had in hand and in view tremendous operations growing out of the war, and Mr. Du Pont was deeply interested in strengthening the company by increasing the stock interest of the men on whom it depended to carry this great work through successfully. This policy was one the company had itself followed by awarding as a bonus to its e-mployés, the *143 right to purchase shares of its stock which the company bought for such bonus purpose or issued from its treasury stock. Coleman’s plan to thus sell to the company some of his own stock for distribution among its employes was approved by Alfred Du Pont, who was a vice president, a member of the board of directors and of the finance committee, and who, next to Coleman, was the largest shareholder of the company. It was, as appeared from the proofs, likewise discussed by Coleman with Pierre S. Du Pont, who was also a vice president, director, and member of the finance committee, and he also approved thereof. It would also appear from the proofs that, prior to his going to Minnesota, Coleman had been spoken to by some of the other leading men of the company as to whether he would sell some of his slock, and he was anxious to give them an early answer, and it is also clear, from the references here and there in the correspondence, that Coleman was somewhat apprehensive that some of its leading men might leave the service of the company. At all events, Coleman, Alfred, and Pierre all concurred in the general desirability of the company acquiring stock from Coleman, not for the company itself, but for the express purpose of enabling certain of its employes to buy it. Indeed, there was no talk or suggestion at that time of the company buying any of this stock for investment, profit, or for any other purpose than the one above indicated, and it is quite clear, also, that Coleman had no thought of selling to the company, but his whole purpose was to attract leading men in the company to buy the stock at a price he regarded as under its value, and thus strengthen the company and the 57,000 shares of slock which he would still own.
Before leaving for Minnesota, Coleman, on December 7, 1914, wrote Pierre as follows:
“Dear Sir: As you know, I have always felt those in responsible positions in our company should be encouraged to become importantly interested in the common stock, and 1 have, as you know, always thought well of the common stock and put a higher figure on it than you have. I think it well worth 185 to-day. and think it will go to 100 or 200 before the year 3915 is many months old. This ownership of common stock by tbe leading men is of so much importance to the company that as a member of the finance committee (the company having cash away beyond its requirements) I would recommend the funds needed to carry the stock for these men be advanced by the treasury.
“I am willing to sell for the purpose 20,000 shares at $100 per share ex dividend, payable in say ,‘10 or 60 days. To guide me I should like to have a suggestion from the finance committee, or a committee appointed hy them, as lo how it should be distributed. Inasmuch as important men associated with us have asked me to sell them some stock, I should like to have a prompt answer from the finance committee to enable me to reply.
“If the important stockholders in Hercules Powder Company think well of the plan, make a similar offer to president of Hercules Powder Company, except the number of shares will be much smaller, say 4,000, and 1 think and hope you gentlemen feel the important stockholders in that company should recommend to the directors of that company that the Hercules Company advance the cash needed as the company can spare it to enable the directors and those they suggest) to secure this stock. The same, with much reduced, number of shares, 700 or 800, 1o the president of the Atlas Company.
“I attach a copy of letter I was going to write to president of the Hercules and Atlas Companies, but before sending same would appreciate any suggestions you gentlemen care to make.”
*144 Pierre subsequently told Alfred Du Pont of the fact of Coleman’s offer and his plan for the Powder Company, and also for the Plercules Company, who at the time approved of the purchase of the stock and its distribution among the principal men of tire company, but desired to consider further as to the price. The testimony of Alfred in that regard was:
“Q. You say you learned as to the sale of Mr. T. O. Du Pont’s stock, or part of it, through some suggestion from Mr. P. S. Du Pont. Where was it you heard it? A. In my office in the Du Pont Building.
“Q. What took place there? A. Mr. P. S. Du Pont informed me that he had received a letter, or that he had received information, from Mr. T. C. Du Pont to the effect that he desired to sell 20,000 shares of his stock to the Powder Company at $160 a share ex dividend, for the purpose of redistributing this stock among some of the company’s more important employes.
“Q. Did you consider the matter with Mr. Pierre Du Pont then? A. X discussed it for a few minutes.
“Q. Did you reach any conclusion? A. No conclusion, other than I agreed with him. * * *
“Q. What was said by you and what was said by P. S. Du Pont as to the question of the advisability of the purchase? What was said by you in that meeting with P. S. Du Pont, and what was said by him as to the advisability of making the purchase? A. He said that he thought it would be an excellent thing to make the purchase.
“Q. What did you say ? A. I said I thought so, too, so far as purchasing the stock and redistributing it among employes. The only question I wished to consider was upon the price; that it involved a large investment on the part of the company.”
Thereafter Alfred evidently gave further consideration to the question of price, which, as we see, involved an outlay of $3,200,000, and decided the price asked — $160—was too high, and that no decision as to the price should be given until the finance committee met. This conclusion he embodied on December 14, 1914, in a letter to Pierre as follows:
“Dear Sir: After giving the question of purchasing a certain large block of Du Pont common further consideration, I believe that 160, the price you talked of, is too high, 150 would be purchasing it on a 6 per cent, basis, and 160 a 5 per cent. This is too low a rate for the company to invest its spare funds, and furthermore, if it were offered to any of our employés, it would not be sufficiently attractive at that price. I see no objection to the company’s purchasing this stock, but the question of price is one of grave importance, owing to the large investment. I would suggest that no decision as to .the actual price be given the present owner until the finance committee has had ample time to think the matter over and discuss it together.
“Yours truly, Alfred I. Du Pont, Vice President.”
In a subsequent letter to Pierre, dated December 21st, Alfred called attention to the mistake made in stating the stock at 150 would yield 6 per cent., and says 150 should read 133, and then adds:
“I doubt whether the investment of the company’s surplus earnings by the finance committee on a basis even as high as 6 per cent, could be justified. In other words, if the company is unable to invest its surplus earnings at a rate better than the stockholders might themselves, they might contend that these earnings should be distributed in the form of a dividend.”
As noted in Coleman’s letter, he desired an early answer, and instead of the offer going over until December 30th, as Alfred suggested, *145 it was brought up at a finance committee meeting on December 23d. This change of meeting day was evidently made to comply with Coleman’s suggestion in a letter he wrote on December 14th, for it appears that Pierre, having received Coleman’s letter of December 7th, made for Coleman a schedule of the employes for whom the stock purchase was to be made. In that regard, Pierre testified:
“A. At the time of the original interview I suggested to T. 0. Du Pont that I make a memorandum of the ¡principal men in Ilia company who would he reooffiiixed in suggesting distribution of the stock to the employes. I made that memorandum and handed it to him; and from that memorandum it appears that the allotment of stock to the executive committee by T. 0. Du Pont, plus three times the annual salary of the men receiving $500 per month or more added up to 20,700 shares.”
Thereupon Coleman enlarged his offer of 20,000 to 20,700 shares by his letter of December 14th, as follows:
“Dear Sir: I have given a great deal of thought to my letter of December 7th as to the distribution of this stock, and my judgment, is that each member of the executive committee be allowed 1,500 shares; that the men whose salary is í¡500 a month and over will be allowed to subscribe for three times the amount of their salaries. This makes a total, according to the memorandum yon left with mo, of 20,700 sharps. T am willing to furnish the other 700, or the company can do this, as in your judgment seems advisable.
“I suggest you make this announcement some time prior to the 23d of this month, as I think it has some advantage. As I. am going away to-day, and do not know how long I will be gone, I have left the matter in Mr. D. L. Dun-ham's hands. He can come to Wilmington and see you upon receipt of telegram from you.”
This letter was written on December 14th, but there is no testimony on Alfred’s part that prior to the meeting of the finance committee, on December 23d, this letter was shown to him, or that he knew of the change Coleman had made from 20,000 to 20,700 shares, or that Coleman had left the matter in charge of Í,. \,. Dunham. Up to December 23d there is practically no dispute as to what was done, or what was the attitude of Alfred and Pierre toward Coleman’s offer. The matter was brought up at the meeting of the- finance committee on December 23d, which meeting was attended by Alfred, Pierre, and William. As the present phase of the case largely turns on conflicting oral testimony as to what took place at this meeting, it should be noted that we have written evidence in the minutes of the meeting — evidence of substance, when men’s recollections differ as to events. Turning first to the written evidence, we find the minute of the finance committee. It reads as follows:
“Purchase of Common Stock Owned by Mr. T. O'. Du Pont.
“Mr. P. S. Du Pont presented a letter from Mr. T. O. Du Pont, offering to sell 20,700 shares of common stock of this company at $160 per share. After discussion it was moved and carried (Mr. P. S. Du Pont voting in the negative) that Mr. P. S. Du Pont be instructed to adviso Mr. D. L. Dunham, attorney for Mr. T. C. Du Pont, that wo do not feel justified in paying more than $125 per share for this stock.”
The proof is that the resolution referred to was made by Alfred Du Pont. The minute is attested by the signature of Alfred, Pierre *146 and William, and as to its legality by J. P. Laffey, the counsel of the Powder Company. There is some testimony to the effect that the minute was not wholly correct, and in that regard, and as to what occurred at the meeting, we quote the testimony of the three men present. Alfred’s account is as follows:
“Q. Did you offer that resolution? A. I offered the resolution, but it is not correct, as I remember it.
“Q. Did you write it out yourself? A. No; I did not.
“Q. How was it offered by you? A. I offered it orally.
“Q. Whs there a stenographer there to take it down? A. A stenographer, the secretary of the committee, took it down. * * *
“Q. What words, if any, which you embraced in the resolution, as you offered it, are lacking from the resolution as it appears on this minute book? A. The words should have been ‘at this time,’ or ‘at the present time.’
“Q. Those words were included in the resolution as offered by you? A. So far as I remember, they were.
“Q. Did you have any conversation with Mr. P. S. Du Pont relative to the question of what he should say to Mr. Dunham when he reported the action of the finance committee? A. At that meeting?
“Q. Then or thereafter? A. I suggested, after the resolution had been passed, that in conveying this information to suggest to Mr. T. C. Du Pont that, if he should keep the offer open a month or two longer, we might be able to increase the price offered for the stock.
“Q. You told Mr. P. S. Du Pont that? A I did.
“Q. Who was Mr. Dunham? A. Mr. Dunham was Mr. T. O. Du Font’s representative and secretary. * * *
“Q. When did you first discover that the resolution as it appeared on the minute book lacked the words ‘at this particular time,’ or ‘at the present time’? A. I do not remember.
“Q. Was it immediately after the meeting, or some time thereafter? A. Some months afterwards.”
The testimony of William Du Pont was:
“Q. You say that you were present at a meeting of the finance committee in which the suggestion of Mr. T. Coleman Du Pont as to the sale of 20,700 shares of stock of the company was considered? A. I was present at the meeting when that was considered. * * *
“Q. Please state what attitude or position Mr. Pierre S. Du Pont took on that subject of the purchase. If you can do so, give us what Mr. Pierre S. Du Pont stated as to his view about it. A. I think he advocated the purchase of the stock. I am not sure.
“Q. State what Mr. Alfred I. Du Pont stated as his view about it, and when you stated as your view? A. Mr. Alfred I. Du Pont advocated the purchase of the stock at a certain price.
“Q. What was that price? A. $125 a share.
“Q. What was your attitude? A. That was my attitude, too.
“Q. Was a resolution offered at the meeting to which you refer on that subject? A. I believe there was.
“Q. Who offered it? A. I think it was offered by Mr. Alfred I. Du Pont.
“Q. Was it verbal? A. Verbally offered.
“Q. I call your attention to the minutes of the meeting of December 23d, and read to you the resolution as appears there as follows: ‘Mr. P. S. Du Pont presented a letter from Mr. T. C. Du Pont, offering to sell 20,700 shares of common stock of this company at $160 per share. After discussion, it was moved and carried (Mr. P. S. Du Pont voting in the negative) that Mr. P. S. Du Pont be instructed to advise Mr. L. L. Dunham, attorney for Mr. T. O. Du Pont, that we do not feel justified in paying more than $125 per share for this stock.’ Does that resolution correctly set forth what took place at that meeting with reference to the presentation by Mr. P. S. Du Pont of a letter *147 on tliat subject? A. I do not remember any letter was presented; that is to say, there was no letter given to the board to read.
“Q. Did you see any letter? A. I did not see any letter.
“Q. I read yon further: ‘After discussion, it was moved and carried (Mr. P. S. Du Pont voting in the negative) that Mr. P. S. Du Pont be instructed to advise Mr. D. L. Dunham, attorney for Mr. T. C. Du Pont, that we do not feel justified in paying more than $125 per share for this stock.’ Does that resolution correctly recite what was the action taken by the committee at that time? If not, in what way? A. It is partially correct, but the word ‘now’ is left out, as I remember it, or ‘at this time.’
“Q. You mean at what part of the resolution would that come? A. After the offer of $125 per share.
“Q. ‘That we do not feel justified in paying more than $125 per share now’? A. ‘That, we do not feel justified in paying more than $125 per share for this stock now.’ That is m.v recollection of it, or ‘at this time.’ ”
On cross-examination he testified further:
“NQ. IIow did you learn the nature and character of the offer made by Mr. T. C. Du Pont of the stock at that time to the finance committee or to the company? A. From statements made by Mr. P. S. Du Pont.
“XQ. Will you say that those letters wore not produced at that finance committee meeting from T. 0. Du Pont? A. There was no letter put. on the table at that meeting.
“XQ. Were they not produced and commented upon? A. I do not understand whist you mean by produced.
“NQ. The word is a simple English word. I will have to ask you to say whether they were produced there at the meeting in your sight or presence at all? A. I saw no letter or letters from Mr. T. C. Du Pout. I do not say Mr. P. S. Du Pont might not have had them, but he did not produce them in the sense you mean, by putting (hem down on the table for members of the finance committee to read or look at.
“XQ. Did you ask to see them? A. I cannot say I did. I do not recall.
“XQ. Tliis was a transaction involving upward of $3,000,000, was it not? A. It might have been.
“XQ. Do you not know whether it did or not? A. Yes.
“XQ. Did it? A. Yes.
“NQ. Ami you did not look at the offer that was made by the man who presented this to the finance committee? A. There was no paper placed oil tlie table for any member of the finance committee to read or look at. If it had been placed there, I would have looked at it.
“XQ. I ask you whether you did not see the letter? A. I did not.
“NQ. At any time? A. At no time.
“NQ. You were content with the statement made by Mr. P. S. Du Pont of what was in the letters? A. Yes.
“XQ. And you understood from his statement that that was an offer to the company of 20,700 shares to be distributed among employes, for the purpose of more importantly connecting them with the corporation, and along that line of policy, did you not? A. I believe so.
“XQ. And that it was not an offer of the sale of stock to the company, but an offer of stock to be used to distribute among the employes, out of which the coinjiany would receive no profit. That you understood, did you not? A. I think it was an offer of sale of stock to the company, t.o be bought by the company and distributed to employes.
“XQ. But the company was not to profit by it? It was to go to employés at the price paid for it? A. It might ho.”
The testimony of Pierre as to the minutes and the meeting is:
“Q. Were you present at the meeting of the finance committee on December 23, 1014? A. I was.
“Q. (Minutes of meeting of finance committee held December 23, 1014, handed to witness.) Is that the signature of Mr. Alfred I. Du Pont? A. Yes.
“Q. Who were present at that meeting? A. Alfred I. Du Pont, William Du Pont, and myself, members of the committee, and Mr. Fisher as secretary.
*148 “Q. The minutes recite that you presented two letters of T. C. Du Pont for the consideration of the committee. Were those letters presented at that meeting? A. My recollection is that they were at the meeting.
“Q. Were the contents of the letters discussed at that meeting? A. They were.
“Q. I call your attention to the resolution which was adopted, and I wish you to say whether or not that resolution is correct as it there appears— whether the minutes present a correct statement of the resolution as it was offered, voted on, and adopted? A. That is correct as it stands.
“Q. Mr. Alfred I. Du Pont says that there are some words omitted at the end, ‘now,’ or ‘at the present time.’ What is your recollection as to whecher or not such words were embodied in that minute? A. My recollection is that the minute is correct as it stands; that there were no words ‘at this time,’ or the equivalent..
“Q. And you signed these minutes as correct at that time? A. I did.
“Q. About how long after, do you remember, the meeting, were the minutes presented to you for your signature? A- Within a week or ten days.
“Q. Who prepared the minutes and presented them for signature? A. Mr. Fisher was the secretary of the meeting. So far as I remember he prepared the minutes.
“Q. Mr. Alfred I. Du Pont says that at that meeting, after the adoption of this resolution, he said to you, ‘In reporting this, try and have T. O. Du Pont keep it open for a month or two.’ Was anything of that kind said to you at that meeting? A. I have no such recollection. I am sure I had no such instruction.
“Q. At that meeting state to the court what your position in regard to this resolution was, and what was the position of Mr. Alfred I. Du Pont and Mr. William Du Pont. A. I stated that I believed the plan of selling this stock to the employés was a very good one, to have them interested in the company. I advocated the purchase or the financing of the purchase of the stock by the company for the employes, and also advocated the paying of $160 a share, the offered price. Mr. Alfred I. Du Pont took the opposite view, that $160 a share was too much for the company to pay, and was too much to attract the employes, calling attention to the fact that $160 a share was too low a rate of return, in view of the dividend of 8 per cent., which was then being paid. He expressed his opinion that the investment would not be attractive, either to the company or to the employes, at less than 6y2 per cent, basis, and therefore he suggested $125 a share as being a limit of the price to be paid. Mr. William Du Pont assented to that idea, as I remember, but he did not express himself quite as freely as Mr. Alfred I. Du Pont, but he assented to Mr. Alfred I. Du Pont’s ideas.
“Q. Was this proposal of T. O. Du Pont confined to the Powder Company, or was it coupled with a proposal to the Atlas and other companies at the time? A. He made a similar proposal to the Atlas and Hercules Companies. These proposals are referred to in his letter of December 7th, or the one of the 14th.
“Q. Do you know whether or not his proposal was accepted and acted upon by each of those companies? A. I believe that they were.”
In addition to the oral testimony, there is the written evidence of the minute itself, which reads as follows:
“Purchase of Common Stock Owned by Mr. T. C. Du Pont.
“Mr. P. S. Du Pont presented a letter from Mr. T. C. Du Pont, offering to sell 20,700 shares of common stock of this company at $160 per share. After discussion, it was moved and carried (Mr. P. S. Du Pont voting in the negative) that Mr. P. S. Du Pont be instructed to advise Mr. L. D. Dunham, attorney for Mr. T. C. Du Pont, that we do not feel justified in paying more than $125 per share for this stock.”
Two members of the finance committee, Alfred and William, being adverse to the proposition, under the by-laws or rules of the Powder *149 Company, the subject-matter would, not come before the board of directors for consideration or action otherwise than that the negative action of the finance committee would be reported to the board meeting. Such report was formulated December 24th, and was reported to the meeting of the board of directors held December 30th, and was as follows:
•‘Purchase of Common Stock. — An offer was received from Mr. T. C. Du Pont to sell 20,700 shares of the common stock of this company at ¡?160 per share. The committee expressed the feeling that we are not justified in paying more than $125 per share for this stock, and asked Mr. Pi S. Du Pont to take the matter up with Mr. T. C. Du Pont further.”
It will be noticed, in passing, that the members of the finance committee, as recorded, instructed Pierre Du Pont to notify Dunham, the attorney of Coleman Du Pont, and its report to the board of directors requested Pierre to take up the matter further with Coleman Du Pont himself. The action of the board of directors on this report was embodied in the resolution in its minutes as follows:
•‘Resolved, that the action taken by the finance committee from November 19 to December 23, 1914, inclusive, be approved, ratified and confirmed.”
At this point we stop to observe that, laying aside, for the present, the large mass of testimony as to subsequent events confirmatory or contradictory of the two parties, final analysis shows that the oral and written testimony, above quoted, summarize the basic questions on which the right of action of the Powder Company, attempted to be enforced in this bill, must, in final analysis, depend. Those questions may be summarized as follows:
First. Was Coleman’s oiler to sell to the Powder Company itself, or to the company for the benefit of certain persons in the Powder Company employ ?
Second. Was the action of the finance committee an acceptance, rejection, or retention of Coleman’s offer?
Third. Was the action of the board of directors, in approving, ratifying, and confirming the action of the finance committee, an acceptance, rejection, or retention of Coleman’s offer?
That there was no acceptance of the offer is conceded by every one. The matter then resolves itself into the further question: Was there a rejection by the Powder Company of the offer? For, if there was, then the foundation on which this bill rests disappears. Or, lastly, if there was neither rejection nor acceptance, but an attempted retention of Coleman’s offer by the Powder Company, for the purpose of carrying out the specific purpose of resale to certain employés of the Powder Company, were the circumstances surrounding such retention such as to constitute Pierre Du Pont an agent of the company to negotiate further in regard to such offer. That, as we have said, there wins an acceptance of Coleman’s offer no one contends. Was there a rejection? The defendant says there was; the plaintiffs say not. What, then, is the proof in that regard? That there is a variance in the proofs in regard to this phase in the case is apparent, but that this means there is a willful misrepresentation on either side we do not believe, and our closer study of the proof, the situation and viewpoint of tlie *150 different participants, satisfies us that such differences as do exist are attributable to such different viewpoints, the relation they bore to the matter, and the natural tendency of us all to remember and emphasize, particularly in the after-light of later events, the things, words, or events which confirm our present views.
Starting with the meeting of the finance committee on December 23d, we have the acknowledged situation of an offer of Coleman made to the company and a meeting of the finance committee called at the request of Alfred Du Pont to consider that offer. We find nothing whatever in the testimony to warrant the belief that either Pierre, William, or Alfred Du Pont went to that meeting with any other purpose than considering the offer of Coleman. It was an offer that would naturally have both concerned all of them as large stockholders and interested them as officers of the company. The situation was a grave one. Coleman was the largest stockholder of the company, he was on the eve of a grave surgical operation, he had been approached to sell his stock, he feared some of the leading men of the company might be drawn away from it, and he was anxious to hold them. That Pierre was anxious to accept Coleman’s offer then, that he voted against the resolution that was finally offered, that when he purchased Coleman’s stock in February, 1915, he carried out, in substance, the plan which Coleman, in December, wanted carried out, namely, the acquisition of large portions of Coleman’s stock by leading men in the company, shows conclusively that, tested by Pierre’s motives, wishes, and subsequent acts, we are justified in finding that, when Pierre entered that conference, when he voted against Alfred’s motion, and when he testified that he was in favor of the acceptance of Coleman’s offer, such was the fact.
Such being the case, what motive would Pierre have for withholding from Alfred and William the full terms of Coleman’s letter? The only pertinent fact alleged to have been withheld was Coleman’s belief that the stock he offered at $160 he regarded as worth $180 or better. Pierre had every reason to tell his associates of this fact. He was urging the acceptance of Coleman’s offer at $160. On the other hand, Alfred and William were contending $125, or at most $133, was its full value. Coleman’s letter would, so far as Alfred and William had confidence in Coleman’s judgment and the fairness of his offer as a benefit to the company, have strengthened Pierre’s wish to accept the offer. What motive could Pierre have then had in suppressing Coleman’s view? We can readily see how Coleman’s view would, in point of fact, have no weight in deciding this matter, other than to show the utter hopelessness of Alfred and William bringing to the price of $125 or $133, the price they contended for stock, which Coleman was offering at $160, and which he regarded as worth $180, or even $200, and whose then belief subsequent events more than justified. Indeed, it is quite evident that this estimate of Coleman’s was a mere surmise, and that the data on which he formed that surmise was equally open to Coleman, to Alfred, to William and to Pierre, as officers of the company, all conversant with its present and prospective work, with its book values and its contracts. The data from which Coleman judg *151 ed was open to them all, and as officers and business men they formed their own estimates, Alfred and William at $125, Pierre at $160, and Coleman at a higher figure.
It inquires no minute reading between the lines to see the fundamental difference between Alfred’s and William’s views, who based their value of the stock on dividends then being paid, while Coleman looked to the future possibilities of contracts and expansion, which was known to Alfred and William and did not affect their estimate of present-values. It is therefore quite apparent to us that Pierre was anxious to see Coleman’s offer accepted, that the formal recording of his vote favoring such acceptance, that the absence of any object he could have had in suppressing Coleman’s prediction of higher value, of the fact both the Atlas and Hercules Companies accepted Coleman’s offers for their employes, made to them in the same letter, and there is no proof that any suppression of Coleman’s letters was made when Hercules and Atlas took action; all of these considerations lead us to the conclusion that we find no motive for Pierre’s withholding the letter, and when we couple this with the fact that Alfred himself made the motion which recited that “Mr. P. S. Du Pont presented a letter from Mr. T. C. Du Pont, offering to sell 20,700 shares of common stock of this company at $160 per share,” that he subsequently verified such minute by signing the same, and that the doings of the finance committee were reported to the directors in the statement that “an offer was received from Mr. T. C. Du Pont to sell 20,700 shares of the common stock of this company at $160 per share,” we are justified in feeling no concealment of these letters was made by Pierre.
Moreover, we must not overlook the fact that the proofs show that Coleman’s offer in his letter of December 7th was only for 20,000 shares of stock, and this the offer which Pierre told Alfred about, and about which Alfred wrote in his letter to Pierre of December 14th. But, as we have seen, Pierre testified that at Coleman’s request he (Pierre) prepared a list which showed that 20,700 shares would have to be provided to carry out his plan, and that on December 14th he received the letter from Coleman, changing his offer to 20,700 and requesting an early answer be given to Mr. Dunham, his secretary — two elements that were not embodied in the letter of December 7th. There is no proof by Alfred that Pierre laid this second letter before the meeting of the finance committee on December 23d, and as the motion made by Alfred at that meeting recites that Coleman’s offer was 20,700 shares, and instructs Pierre to give notice, not to Coleman, but to Dunham, it would seem that the statement in the minutes that a letter was presented probably records what happened.
Moreover, the minutes, and the absence from the minutes of any copy of the letter, and the testimony that Pierre informed his colleagues on the committee of the fact of the offer, but did not produce the letters themselves, suggests that, if such was the course of the procedure, it points toward the conclusion that the action of the committee was -intended to be a declination of the offer. For let us suppose these three experienced business men had before them an offer for $3,200,000 of stock made by a sick man, and which they wished to retain and re *152 port to their board; would they not naturally have placed that offer on their minutes ? On the other hand, if they felt the offer was so far beyond the value of the stock as they testified they then thought, and if they were ready to decide on that price and decline Coleman’s price of $160, it was quite natural for them to omit calling for the letter and placing it on the minutes. That no one called for the letter, that no one suggested putting it on the minutes, is in line with the contention that the purpose the committee had in view, and what Alfred’s motion had in view, was a then declination of Coleman’s offer. AH the circumstances called for prompt action. In his offer of December 14th Coleman said:
“I am willing to sell for the purpose 20,000 shares at $160 per share ex dividend, payable in say 30 or 60 days.”
Having named no time for acceptance, Coleman’s offer was liable to withdrawal at any time. He requested a speedy action, saying he had other offers, and that—
“Inasmuch as important men associated with us have ashed me to sell them some stock, I should like to have a prompt answer from the finance committee to enable me to reply.”
The letter of Alfred to Pierre on December 14th, “I would suggest that no decision as to the actual price be given to the present owners until the finance committee has had ample time to think the matter over and discuss it together,” and in his second letter of the same date, “I presume that this matter will be discussed at our next finance meeting on December 30th,” indicate that he recognized the propriety of some answer being given, and that a decision should be made at the next meeting of the finance committee. And the fact that action was taken up at a meeting a week earlier than the' expected meeting of December 30th, and that whatever action was then taken was on the motion of Alfred, tends to show that the decision which in his letter of December 14th he suggested should be postponed to await the discussion of price, which he suggested should be done by the finance committee, and such price discussion having taken place with no' change of view on his part, it would seem reasonable that, when he offered the resolution as recorded in the minutes, or that resolution with the words “now” or “at the present time” added, he offered that with a view to reaching a decision. If the company wished to consider the offer of Coleman further, it was sufficient to take no action. If they wished to make a counter offer to Coleman, it was open to embody such counter offer in a motion. If they were not prepared to reach a decision on Coleman’s offer, and wished to report the matter to the board and get their view, it was open to them to so move and act. But the finance committee neither took action by motion in a counter offer to Coleman, nor a reference to the board of directors, but the motion by express reference did direct a communication with Dun-ham. Why communicate with Dunham ? Why did Alfred select Dun-ham as the person to be notified ? There is no proof that he had power to' continue Coleman’s offer; there is no proof of authority in him to consider a counter offer.
*153 ‘Why, then, did Alfred’s motion select and draw Dunham into the matter? The fact that he was thus selected by Alfred is evidenced by the motion, and we can understand and carry out the intention of the Powder Company, then evidenced by the acts of its own officers and embodied in its own minutes, on no other rational theory but that the finance committee by that motion intended to decide on Coleman’s pending offer and communicate that decision to Dunham. That they actually intended to do something, that they meant that what they did do should be notified to Dunham, and that what they aid was of such moment that Pierre Du Pont had his vote recorded against the action of the committee, and all facts tending to deepen the conviction that the recorded action of the Powder Company taken by its finance committee acting through a majority of its members evidenced a decision of the Powder Company not to then accept Coleman’s offer. And the fact that they directed information of its action in reporting their action to Dunham and in their report to the board of directors “the committee expressed the feeling that we are not justified in paying more than $125 per share for this stock, and asked Mr. P. S. Du Pont to take the matter up with Mr. T. C. Du Pont further,” and their making no allusion to Dunham, deepen the belief that the finan.ee committee, the board, and therefore the company, regarded Coleman’s offer at $160 of 20,700 shares of the common stock of the company for distribution among certain of its officers as declined when Dunham was notified, and that, if anything further was to be done, it was by negotiations direct with Colem'an. Indeed the suggestion in the report of its action to the board, “that it had asked Mr. P. S. Du Pont to take the matter up with Mr. T. C. Du Pont further,” read in connection with the report that “the committee expressed the feeling that we arc not justified in paying more than $125 per share for this stock,” can only be explained on the theory that when he notified Dunham, he did all the finance committee wished him to do.
Moreover, that a decision that the company could not accept Coleman’s offer was a reasonable one, and one to which a majority of the finance committee might fairly come, and which they were then prepared to decide, is quite apparent from the proofs. The finance committee wag not considering a purchase of this slock for the Powder Company; it was to go to certain officers of the company as an attractive investment, which they were obtaining at an attractive price. It was the viewpoint of the officers who were to get this stock that had to be considered. The company could not gain by the transaction, hut it might lose or tie up a lot of its funds if the officers, would not invest in the stock after the company took it. William Du Pont says he agreed with Alfred’s view, and there was no doubt as to Alfred’s unvarying position all through, that this purchase was for the benefit of the officers and the price would not attract them. As we have seen, Coleman’s offer was made in a letter to Pierre dated December 7ih. Evidently the price had been discussed between Alfred and Pierre, and the matter had been further considered by the former, and on December 14th he wrote Pierre:
*154 “After giving the question, of purchasing a certain large block of Du Pont common further consideration, I believe that 160, the price you talked of, is too high. 150 would be purchasing it on a 6 per cent, basis, and ICO a 5 per cent. This is too low a rate for the company to invest its spare funds, and furthermore, if it were offered to any of our employes, it would not be sufficiently attractive at that price. I see no objection to the company’s purchasing this stock, but the question of price is one of grave importance, owing to che large investment.”
A week later, in writing under date of December 21st, to correct the price of 150 and reduce it to 133, to put that price at 6 per cent., Alfred adds, in his letter already quoted, to his former position that the officers might not take the stock, and that the stockholders of the company might object to the acquisition of the stock at 133 saying:
“X doubt whether the investment of the company’s surplus earnings by the finance committee on a basis even as high as 6 per cent, could he justified. In other words, if the company is unable to invest its surplus earnings at a rate better than the stockholders might themselves, they might contend that these earnings should be distributed in the form of a dividend. 1 presume that this matter will be discussed at our next finance meeting, on December 30th.”
The views stated above Alfred still held and then expressed when the finance committee meeting was held. The proof in that regard is:
“A. I stated that the purchase of the stock for distribution among employe's was in principle good, but the investment was so large that the finance committee, in my opinion, could not justify the investment of so large a sum unless on a 6 or 6Í4 per cent, basis, and inasmuch as the Du Pont common stock had been paying for some time but 8 per cent., and that at that particular time there was no immediate prospect of its being increased, that I suggested that the price was too high, $100 a share, and suggested the price of $125 a share as being more in conservation with the company’s interests.
“Q. What did Mr. William Du Pont say about the advisability of the purchase? A. He agreed with me in that thought.
“Q. What did Mr. P. S. Du Pont say as to the advisability of making the purchase? A. He expressed a belief or opinion that the price of $100 a share was a proper price for the company to pay.”
It will thus be seen that when the meeting came off all three men still had their unchanged views. Pierre favored acceptance at $160; Alfred and William stood on $125, asserting their belief the dividends of 8 per cent, then paid by the company would not be increased. With these decided views held by experienced business men, all of whom were its leading executive officers and conversant with its affairs, it is quite evident that they were all in a position to answer Coleman’s request that his offer at $160 be promptly disposed of, and that the wide divergence of estimate of value between Alfred’s and William’s estimate of $125, which Coleman as well as Pierre regarded as worth $160, made such a wide split as showed all the parties that the nonacceptance of Coleman’s offer was a foregone conclusion, since Alfred and William were in a majority on the finance committee.When, therefore, the committee reported its action to the board, its suggestion that it had “asked Mr. P. S. Du Pont to take the matter up with Mr, T. C. Du Pont further” was rather a courteous way of declining what Coleman regarded as a generous offer, tending to deepen the interest of its officers in the company; and, indeed, that no trust or *155 agency was then conferred on Pierre by the finance committee to negotiate further with Coleman in reference to his offer of 20,700 shares of common stock at $160 is indicated, not only by a lack of corporate action, at that time expressed in what was recorded, but assuming, for present purposes, that to it are added the words which Alfred says were omitted “at this time,” or “at the present time,” their addition does not lessen the general effect of the resolution. This resolution, reduced id you have any conference with anybody about this matter, or in connection with it, when you arrived in Wilmington? A. I was asked to come to a meeting at the office of Mr. Alfred I. Du Pont.
“Q. When was that? A. I think it was the evening of March 4th, but I am not sure. It might have been the 5th.
“Q. Who were present at that meeting? A. Mr. Alfred I. Du Pont, Francis I. Du Pont, Mr. Philip Du Pont, and several others.
“Q. Was Mr. P. S. Du Pont there? A. Mr. P. S. Du Pont came into the meeting; also Mr. Irénée Du Pont, without invitation, as I understood.
“Q. Had you been informed, or were you informed then, who were associated with Mr. P. S. Du Pont in the purchase of this stock? A. I think Mr. P. *170 S. Du Pont stated at that time who was associated with him; also I think the public print stated.
“Q. Do you recall who Mr. P. S. Du Pont stated were associated with him? A. No, sir; I could not state.
“Q. Did you say anything in that meeting to Mr. P, S. Du Pont about this matter? A. Yes.
“Q. Please state to us as well as you can. A. I cannot recall what words I used, but I objected to the purchase of the stock.
“Q. State as .nearly as you can your recollection of what you said at that meeting in the presence of Mr. P. S. Du Pont. I do not mean the exact words. I mean as near as your recollection is as to the substance of what you said. A. I cannot give you the words any more than what I have said. I cannot recall anything more than what I have already said.
“Q. What did you say? A. X told him X objected to the purchase of the stock for himself.
“Q. Did you tell him why you objected to the purchase for himself? A. I cannot say. I did tell him once, hut I cannot say whether it was at that meeting or afterward.
“Q. What did you tell him at any time as your objection? About what time was it you told him why you objected? A. I could not say.
“Q. Did you then tell him of your objection. Did Mr. Alfred I. Du Pont say anything to Mr. P. S. Du Pont at that meeting? A. Yes.
“Q. Give us, as near as you can, as far as your recollection goes, what he stated. A. He objected to the purchase of the stock, but I cannot give you the words.
‘“Q. Can you give us the substance of his objection, why it was he objected? A. No, sir; I cannot.”
■ The proofs show that Alfred Du Pont, having learned of the sale on February 28th, had an interview on March 1st with Pierre. What took place is thus stated by Alfred:
“Q. The letter of Mr. T. Coleman Du Pont is dated the 19th day of February. Will you tell me when you heard next thereafter — when you heard anything about any sale of the stock of T. Coleman Du Pont? A. When I read an account of the purchase of T. Coleman Du Pout’s stock by P. S. Du Pont and his associates in the Sunday papers on February 28, 1915. * * *
“Q. What did you then do on receiving that information in the paper? A. I waited until March 1st, thinking perhaps Mr. P. S. Du I’ont would come and tell me something in regard to his having acquired the stock.
“Q. You waited until 4 o’clock on the day of March 1st? A. I did.
“Q. What did you do then? A. I telephoned to Mr. P. S. Du Pont and asked him if he would kindly come down to my office for a few moments.
“Q. Did he come? A. He did.
“Q. Then what took place between you in your office? A. I asked Mr. P. S. Du Pont whether the information conveyed by the Sunday paper regarding his having purchased this stock was correct. He informed me that in the main it was true. I then said, ‘Do I understand that you have acquired all of Coleman Du Pont’s stock, both common and preferred, of the Du Pont Company?’ He said that he believed that he had. I said, ‘What do you propose to do with it?’ He said that the stock would be held by a holding company that he had organized for that purpose. I asked him who the stockholders in that holding company were. He said they were himself, his two brothers, Lammot Du Pont and Irénée Du Pont, his brother-in-law, Mr. B. B. M. Carpenter, and Mr. Baskob, treasurer of the company. I asked him in what proportions the stock of the holding company was divided among the gentlemen to whom he had referred. He told me that he would hold about 50 per cent., that his two brothers would hold' about 16 per cent, each, and that the others would hold smaller amounts. I do not remember whether he stated exactly the amounts or not, but they were smaller amounts. I then asked him how he had financed the purchase for acquisition of this stock, and he told me he had borrowed through J. P. Morgan & Co., of New York, a large sum of money. I *171 asked him whether Morgan had loaned Mm the whole amount. He told me. it had been redistributed among certain other banks, at least a large proportion. I asked him if he would kindly give me the names of the banks. He said he could not tell me the names of the banks. I thou asked Mm whether ho proposed to divide the stock-acquired from T. Coleman Du Pont ultimately among the stockholders of the holding company in proportion to their respective holdings in the said holding company, and he told me that he did. 1 then said to him: ‘Pierre Du Pont, don’t do this. It is wrong.’ He asked me why it was wrong. I said: ‘Because you have accomplished something by virtue of the power and influence vested in you as an officer of the company, and by knowledge which you could only have acquired in your official capacity, which you could not have accomplished as a private individual, flor that reason the stock, which you have acquired in this matter does not belong to you, but belongs to the company which you represent. I therefore ask yo-u to turn this stock over to the company.’ He said ho was very sorry that he could not agree with my point of view. Tn a further endeavor to get him to make some concession along- my line of thought, I said: ‘Pierre, your fattier and my father were brothers. Neither of those men would have approved, I am eonddent. of what you have done. For their sake, as well as for your ov;n. put that stock in the company's treasury, because you can’t afford to do anything that will invite criticism or condc'miulion on the part of amy of year fdlow bunkers wMch would in any way injure your business reputation.’ I said: 'Pierre, I ask you.’ He said ho would not do it; that the thing was an accomplished fact, and could not be undone. I said: ‘Then you refuse to make this concession which I ask of you?’ He said : T do.’ That terminated the interview.”
On March 3d, Alfred again met Pierre at. a meeting where a number of die Du Pont family, including Philip K. Du Pont, the plaintiff, were, present, and restated his position in regard to the purchase by Pierre as follows:
“Q. When was the next conversation that you had on this subject when Pierre S. Du Pont was present? A. On the evening of March 3d.
“Q. Where was that? A. In my office in the Du Pont building.
“Q. Who were present? A. Myself, Mr. William Du Pont, I think Mr. Alexis Du Pont Mr. Philip Du Pont, Mr. Kugene-B. Du Pont, Mr. Francis Du Pont. Mr. Pierre S. Du Pont, and Mr. IrSnée Du Pont.
“Q. What was the ¡subject of the discussion at that meeting? A. The sui>-jeet of his having acquired Coleman Du Font’s stock and the propriety of the manner In which it had been acquired.
“Q. Please state what was said to P. S. Du Pont on that occasion, so far as you recall, by yourself or any one else. A. I could recall what I said myself. It was merely a reiteration in a general way of the position I took on March 1st, that he owed it to the company to turn that stock into the company’s treasury, owing to the manner in which it was acquired.
“Q. Did you hear anybody else say anything to him on that occasion along the same line? A. Mr. William Du Pont expressed himself on the same line; also Mr. Francis I. Du Pont. * * *
“Q. Give us, as near as you can, the position taken by Mr. William Du Pout and expressed to Mr. P. S. Du Pont at that time.' A. As near as I can remember, lie stated that he believed that Mr. P. S. Du Pont should turn that stock in to the company; that he had purchased it in his official capacity, and ha would consider any other disposition of the stock, am, infringement of the properties of his office or a breach of faith as an officer.”
As will appear from this, Pierre Du Pont refused on March 1st to turn tlie Coleman stock over to the Powder Company. On March 5th, however, he receded from this position, and addressed a letter to the company, in which he stated:
*172 “As our transaction was made in the form of an offer to T. C. Du Pont, I give the company similar opportunity to make an offer to me and my associates.”
In this letter, Pierre Du Pont states his understanding of the acts of bad faith which Alfred and William Du Pont charge against him in acquiring Coleman’s stock. In that respect the letter says:
“On that date, March 2d, I received the following telegram from Mr. William Du Pont: ‘Paper states you have purchased Coleman’s stock. I presume for the company. Any other action I should consider a breach of faith.’ Mr. Alfred X. Du Pont expressed to me verbally a similar opinion. In taking exception to the accusation of bad faith, I learn that the meaning attached to these words is as follows: That I could not have made the purchase of this block of stock unaided by the company; that, therefore, the company is entitled to the stock. There seems to be no contention that my position in the company enabled (disabled?) me to receive an offer from Mr. T. C. Du Pont— the point being that I could not have financed the purchase of the stock without using company credit.”
It further appears, from the minutes of the directors’ meeting of March 5th; that William Du Pont and Alfred Du Pont were present at this meeting, that the subject-matter of this letter was discussed, and that no objection or exception to the correctness of Pierre’s statement of Alfred’s and William’s position was made by them, nor any assertion that Pierre had been constituted an agent by the finance committee at its meeting of December 23d.
The letter was referred to the finance committee, which considered it at a meeting held March 8th, and again at a meeting of the directors on March 10th. Both these meetings Alfred Du Pont and William Du Pont attended, but the minutes do not disclose that any assertion was made by either of them that Pierre had been constituted an agent to negotiate at the finance committee meeting of December 23d. Indeed, that such allegation was not then made by Alfred or William Du Pont is not a matter of mere inference drawn from its nonappearance in the minutes; but in the brief of the plaintiff’s counsel it is affirmatively stated no such statement was made by any one. In that regard the brief says:
“No disclosure was made for the benefit of the directors not members of the syndicate that Pierre had been instructed by the finance committee to continue negotiations for purchase by the company, or that the correspondence had ensued which had been attended to.”
As Pierre Du Pont has always contended he was not so instructed by the finance committee, it is manifest that, if his contention was true, he hád no information to give on that point, and therefore did not conceal anything. On the other hand, if such instruction were given by the finance committee to Pierre to continue negotiations, there was every reason why Alfred Du Pont and William Du Pont should then have called the attention of the directors to the fact of agency. Their not doing so on this and on the other occasions noted above emphasizes the correctness of our conclusion, stated above, that at its December 23d meeting the finance committee did not constitute Pierre Du Pont itk agent for further negotiations with T. Coleman 'Du Pont. In further coiifirmation of this view, it will also be noted that when this bill was *173 filed’, some six months later, even the bill was not based on the alleged fact that Pierre Du Pont had been made an agent to negotiate, by the finance committee, at its December 23d meeting, but, on the contrary, the charge of the bill was that Pierre Du Pont and his associates had violated their duties. In that respect the gist and theory of the bill are properly summarized in the brief of plaintiff’s counsel as follows:
“On December 8, 1915, the present bill was filed by Philip IP. Du Pont, on behalf of himself and other stockholders, alleging * * * that Pierre Du Pont and Ms associates had fraudulently and in violation of their duties to tíre Powder Company acquired the Coleman stock for themselves instead of for the company.”
It will therefore appear, from the pleadings of the bill, and from the absence of proof that such agency was alleged or urged on the several occasions referred to above, that the real ground of recovery contended for is not the failure of Pierre Du Pont individually to perform, duties imposed on him as an agent by the finance committee on December 23d, but that Pierre Du Pont and his associates (who so far as the proofs go had no part or even knowledge of such alleged agency of Pierre) had, after Coleman withdrew his offer, fraudulently violated their duty as officers of the Powder Company in buying such stock. It further appears, from the proof, that such fraudulent violation of their duty as officers was a conclusion based on the premise that the syndicate could not have bought the Coleman stock unless they had made use of the Powder Company’s credit and resources and misused their position as officers to do so; and because they had made an otherwise impossible purchase, it is urged that the fact of the purchase in and of itself necessarily convicted these men of bad faith and fraud as officers of the company. This position was summarized by Alfred Du Pont in testimony already quoted:
“I then said to him: ‘Pierre Du Pont, don’t do this. It is wrong.’ He asked me why it was wrong. I said: ‘Because you have accomplished something by virtue of the power and influence veiled in you as an officer of the company, and by knowledge which you could only have acquired in your official capacity, which you could not have accomplished as a private individual. For that reason the stock which you have acquired in this matter does not belong to you, but belongs to the company which you represent.”
No clearer, more concise, statement of the theory of this bill, and of Alfred Du Pont’s consistent reasoning and contention in support of it, could be made than these words, which, it will be observed, in no way embody any allegation, relation, or malfeasance of an agent, but, on the contrary, is based on Pierre’s duty as an officer of the company. That this was Alfred’s contention is shown by other witnesses. Francis T. Du Pont, who intervened as a plaintiff in the bill, was present at the meeting of the Du Pont family on March 4th, and gives an account of the meeting. His testimony makes no mention of any allegation of Pierre Du Pont’s agency being made at this meeting, but says:
“Alfred Du Pont had taken the position that the deal was financed on the credit of the company. I took that position, and went further; I took the position that a corporation had been formed, which controlled a large amount of stock, and therefore controlled the power to invest the company’s money, and I took the position that that is what made the transaction possible; that *174 it was the power over the company’s treasury which was really bach of the notes of the Securities Company, He (William) also expressed himself, but just what he said I do not know. He expressed himself against the fairness of the transaction. * * * My impression is pretty strong that he said that the credit of the company had been used.”
And the proofs further show this was the view then held by Francis T. Du Pont. He was asked:
“Will you tell the court in what respect it [the purchase of the Coleman stock] was unfair to the company?”
And said:
“Because I did not believe he [Pierre] had the money to buy it. * * * He secretly made some arrangement with Mr. Coleman Du Pont to get his stock. That arrangement none of the directors were told about. He was an officer. The treasurer of the company was co-operating with him, and was instrumental in placing large deposits at different banks in New York. Even if those same banks were not the ones which helped finance the company, and I am not raising that question, the very expectation that there would be those deposits gave him a power which, in my opinion, he should have used for the company and not for Mmself.”
After due consideration of this phase of the case, we are of the opinion, and so find, first, that when Coleman Du Pont, on February 16, 1915, offered to sell to Pierre Du Pont his entire holdings in the company, of 13,899 preferred and 63,214 common stock, that neither Pierre nor the syndicate in their own then relations as officers of the company, or by reason of any prior relations of Pierre as alleged agent to negotiate for the 20,700 shares for the benefit of the company’s employes, were disqualified to buy Coleman’s stock; and, secondly, that in subsequently obtaining the credit and money to pay for said' stock, Pierre Du Pont and his syndicate associates made no use of the credit or resources of the Powder Company, or took any illegal advantage of their several official relations to the company.
[4] Having made the purchase, Pierre Du Pont, their representative, at first stood on his and their right to purchase and hold said stock, and refused to convey it to the company, but having subsequently withdrawn such refusal, and having offered, in substance, to allow the company to make such purchase itself, the question arose whether the Powder Company should buy this syndicate stock. This question, in various ways, came before the directors, the stockholders’ meetings, and finally was submitted to the stockholders in an election directed by the court below and held by its master. In this master’s election, á very substantial majority of stockholders voted against the company buying the stock,' and the court below dismissed the bill. Such dismissal decree is here assigned for error. The court below predicated its action on the vote taken by the master, and declined to be influenced by prior actions of directors and stockholders’ meetings. Following, for present purposes, the same course, we shall not recite or discuss the proofs as to such prior meetings and votes; but, -assuming for the present that the master’s election was, as we shall later show, a full, free, and intelligent expression of the will of the majority stockholders, we address ourselves to the question of *175 whether the court below committed error in ratifying the decision of the stockholders hy dismissing this bill.
Turning to that question, what have we? A purchase by executive officers of the company of the holdings of its largest stockholder, and a later offer by them to the company to itself buy the stock at what it had cost them. We have already found that no fraud on the part of these officers, or any of them, was established by the proofs, nor do we now find that in such election the majority stockholders made a wrongful use of their power against a helpless minority, thus creating one of the cases of corporate wrongs, where courts have unquestionably the power and undoubtedly the duty to- interfere. It follows, therefore, that a reversal of the decree of dismissal in this case, and the entry of one responsive to the bill, would in substance and effect have this court hold, first, the purchase could be lawfully made by the Powder Company; and, second, that it must be made, even against the wishes of the majority of its stockholders. To us, however, it has seemed that, assuming for present purposes, but not deciding, that the company had legal power to buy, the proofs show the question of exercising its power to buy was, after all, one of those business questions of corporate policy which the stockholders, through their majority, and not a court, through its equitable power, should decide.
Turning, therefore, to the proofs, let us see what they disclose in that regard. That such question confronted the stockholders was evidenced by the fact that when the offer of Pierre Du Pont to' sell the stock to the company, embodied in his letter of March 5th, came before the directors at their meeting on March 10th, a resolution was introduced which, in substance, involved this question and dealt with the matter as one of business policy. This resolution, which was offered by Alfred Du Pont, was as follows:
“A resolution was offered and seconded that the president of the company, in conjunction with the finance committee, be requested to select a committee of men, who, in their opinion, are capable of passing upon this matter from an economic standpoint, and who are not in any way interested in the company as holders of the company’s securities, with a request to make recommendations as to the propriety of the acquisition of the stock in question by the Du Pont Powder Company.”
We refer to this resolution, which was not adopted, as evidencing the view, not only that it was one of business policy, but that, at the time this purchase was made, the question of the business' wisdom and propriety of the Powder Company itself making this purchase was one of such substantial uncertainty that the then largest stockholder of the company urged that the views of competent, disinterested business men should be had before the company decided the matter. Indeed, that the question was a debatable one, on which men had varying views, is seen from the proofs.
Beginning with the views held by Alfred I. Du Pont, the largest stockholder of the company, his fear, as we gather from the testimony, was that the purchase of this large block of stock by these officers would create a burden which they could not shoulder, and *176 which the Powder Company would eventually have to, in some way, assume. Or, to quote his views in his own words:
“A. As near as 1 can remember, my argument was somewhat to this effect: That Mr. P. S. Du Pont and his associates had acquired the holdings of Mr. T. C. Du Pont by borrowing a certain large sum of money and by creating further obligations in the form of notes to T, O. Du Pont in payment for T. C. Du Pont’s stock; that those obligations would have to be met by some one in some way at some time; and that I could not see any way of payment of those obligations other than getting the money from the company, and I so stated at the meeting before the directors.
“Q. Other than getting it from the company? A. Yes; getting it in .some way from the company’s treasury. In other words, the company would be looked to for the funds in some way. to meet these obligations; that in view of this fact it would be very much better and much more to the interest of the company and its stockholders for the company to make the necessary investment to acquire this stock, than to be placed in a position at some subsequent time where they might be forced to make disbursements in order to meet these obligations, when it would not be desirable or convenient to the company to do so. That in general was the argument which I gave.”
The anxiety of Francis I. Du Pont, one of the interveners in this bill, went a step further, in that he feared the control of the company, in case the notes were defaulted, would pass to Morgan & Co., by reason of the money having been borrowed from them. In that regard he testified:
“XQ. Did you not further say, T believe Morgan & Co. loaned the money with the full expectation that, in case those notes were not paid, they could force the payment from the company’s treasury by some financial scheme T A. Morgan & Co. could have gotten control of the company if the notes were not paid.”
From another angle we have the views of the defendants, who were opposed to the company buying the Coleman stock. In that regard, Raskob, one of the defendants, testified at length as to his reasons for voting against the resolution to have the company make an offer for the Coleman Du Pont stock:
“Q. Did you vote for or against this resolution? A. I voted against it.
“Q. Give your reasons for voting against it. A. I had a' great many reasons for not voting in favor of the purchase of this stock: First, I considered it not any part of my duty as a director and trustee for the stockholders to take $14,000,000 from the treasury of the company and speculate with it in the company’s common stock;, second, I knew that there had never been a precedent for any such procedure in the history of the B. I. Du Pont de Ne-mours Powder Company, nor did I know of any precedent in any other company where the board of directors voted to purchase as a speculative investment practically 20 per cent, of the total outstanding common stock of the corporation, or any other substantial amount. The book value of the common stock of the corporation at that time, which I knew to be about $118 to $120 a share, plus the uncertainties or plus some definite value which common stock might have through the orders, military powder orders, then in hand or likely to be secured, did not warrant any director voting in favor of the purchasing of that stock, stock of that character. The only arguments — the only reasons, for I did not think they were much in the way of arguments — ■ that were offered in support of purchasing that stock, as I recall them, were offered by Mr. Alfred I. Du Pont, concurred in by Mr. William Du Pont, and some by Francis I. Du Pont. Those arguments seemed to be along the line that the company had made this purchase, or had in effect made it, if not actually in fact; the theory being that the syndicate would perhaps be unable' to pay for this stock, in which event the Powder Company would have to pay *177 for it anyway, and they might as well have paid for it then, at the date of that meeting, rather than to find at some future date that they would have to take it up and pay for it. I, knowing full well the nature of the obligation which had been given to finance the transaction on the part of the Du Pont Securities Company could not follow that line of reasoning. I knew, for instance, that the note of $8,500,000 which had been given to J. P. Morgan & Co. carried as collateral 14,599 shares of the preferred stock; certainly under most any conditions that would have been worth $80 a share. That would have made a worth for this collateral of approximately 81,200,000. There were 54,591 shares of common stock held as collateral on that note, and if the value of the common stock had dropped to a point of $120 a share, which was about its selling price at a time previous to the war, the value of that 54,000 shares of stock, together with the value of the preferred stock of $80 per share, would have netted an amount sufficient to pay within about $800,-000 of tho $8,500,000 loan; and for any one to assume that the guaranty of the six gentlemen back of that note was not good for $800,000 was beyond my understanding. I knew, furthermore, that the note given to Coleman Du Pont for $5,900,000 carried as collateral 36,900 shares of the common stock of the company; that that stock, if the worst should happen, and no profit whatever be realized from the business in hand, and the company be forced back to the position to which it was previous to the war — that is, in the position of having only their normal business — the common stock at $120 a share would have cared for all of tho payment of the Coleman Du Pont note except, I think, about $1,500,000. That obligation of Coleman Du Pont ran for seven years. There was absolutely no power on his part to forcq the deposit of additional collateral, no matter to what point the common .stock of the Powder Company which was held on that note as collateral would go, and therefore the underwriters of that note, these gentlemen who were—
“Q. Guarantors? A. No, they were not guarantors on that note; but the six gentlemen in question were principal stockholders in the Du Pont Securities Company, and to assume that those gentlemen, plus the other stockholders who were then in the Du Pont Securities Company, could not have taken care of an obligation or a guaranty or a shortage on collateral to the extent of $1,500,000 in seven years was to my mind unbelievable. I think without exception every director at that meeting must have admitted that. So that, from that point of view, that argument appealed to me as being an argument with no force whatever in favor of making an offer to purchase; in other words, I could not see why that argument should be used as a reason for voting in favor of the purchase of stock.
“Q. Have you any other reasons that occurred to you at that time why the corporation should not buy this stock? A. May I finish my answer?
“Q. You had not finished? A. No.
“Q. Go ahead. A- Another argument used at that time in favor of purchasing the stock was, as I understood it, that the collateral on this loan, if the Du Pont Securities Company were unable to meet this loan, would he sold and likely he captured or gotten control of by J. P. Morgan & Co. X felt that any director that would vote, or would use his vote, to prevent a certain block of stock going to one set of stockholders, no matter who they might be, in preference to another set of stockholders, would bo committing a fraudulent act. Another reason for my voting against that resolution — no, the other reason that I voted against that resolution was because I felt very strongly, although I knew nothing about the law, that any director that would act in his capacity as trustee for the stockholders for the corporation to do a thing which in his judgment, or in the judgment of an ordinarily prudent man, would he injurious to the credit of a corporation, might in some way be held personally responsible in connection with his colleagues voting in favor of such a resolution for any losses which the company might have incurred in connection with that purchase. Mr. Laffey, counsel for the company, was called into tho meeting and stated that the company, in his opinion, could not legally purchase its own common stock for investment purposes in an amount greater than the surplus of the company. But I did not go into that reason, or question him about it, because there were reasons sufficiently *178 ample in my mind to justify voting against any suet proposition without much consideration of that.”
Irénée Du Pont, one of the defendants, gave his views on the company’s buying the Coleman stock as follows:
“Q. How did you vote on the resolution reported from the finance committee with reference to the taking over of this stock or making an offer for it? A. I voted against making an offer for the stock.
“Q. Will you state the reasons that moved or actuated you in making that vote? A. I think the strongest reason is that the company should not speculate needlessly — should not go into speculation which it was not a part of its business to do, especially if that was to buy its common stock, and still more especially if it was at a high value for that common stock, $200 a share. I think that that would be wrong. I think any preferred stockholder would oppose it successfully. I know that I would have been prepared to go after the thing, if they had attempted to malee such a purchase."
The testimony of Carpenter, one of the defendants, was as follows:
“Q. Did you vote on the question or resolution that was reported back to the finance committee? A. I did.
“Q. How did you vote, for or against it? A. I voted against the acquisition of the stock by the company.
“Q. Will you please state your reasons — what reasons actuated you as a director in voting negatively on that proposition? A. I had a very strong feeling that it was the most unbusinesslike thing to do for the company to acquire such a large block of its own common stock, and I felt that any stockholder would have a rather good case against the directors, if they should buy that stock, and if for any reason, the value of the stock should go down. I did not want to be in the position of having a suit brought to help pay that money back to the company.”
Carpenter also testified that he was influenced in his vote by business reasons, as he “felt that the company needed all of the money it could raise to carry on the proposition that we had never attempted before. In that connection, and showing the tremendous work that confronted this company in making these war calls and contracts, the testimony of H. F. Brown is enlightening. Mr. Brown says:
“Q. Will you state to the court some of the conditions and circumstances that confronted the Powder Company in 1914 and early 1915? A. I was in a very good position to realize the situation at that time, being in charge of the smokeless powder operating department, to which department was intrusted the duty of completing perhaps three-fourths of the war contracts which were received. The smokeless powder department prior to the war contained in its smokeless powder department proper (we make other things besides smokeless powder) perhaps about 1,000 men. That includes common labor. Probably not over half of that total number could be called powder makers. Early in March, 1915, the amount of business which had been handed over to me to fill was very large. It was an amount of business far beyond the capacity of the plants to produce. I therefore called upon the engineering department to enlarge those plants. The engineering department undertook to increase the capacity of our plants in record time, and to do in 5 or 6 months what previously would have required 12 to 18 months. We were called upon enormously to increase our operating force. It was impossible to obtain men skilled in the art of powder making. The manufacture of smokeless powder is perhaps one of the most difficult and exacting of all kinds of industry. Smokeless powder grains have to be made with wonderful accuracy, in order to obtain proper ballistic results. We were consequently confronted with a very huge taslc. We had to multiply our force. On the 1st of March orders in hand necessitated multiplying the force by at least *179 1.0 timos, and where those men were to come from, and who was to train them, was an unsolved problem at that time. We took on those additional men. We had the task of training them in this very difficult business, and we undertook to All these war orders at that time.
“Q. How many additional men were taken on? A. When we reached the maximum of our capacity, we had in my department about 40,000 men, as compared with 1,000 men at the beginning.
“Q. When was it you reached the maximum of capacity? A. We reached maximum capacity in May of this year.
“Q. About how much powder liad actually been delivered on these war contracts in March, 1915? A. Prior to the 1st day of March we had delivered on export orders approximately 800,000 pounds of powder, and about 2,300,-000 pounds of gun cotton. We were behind our orders on the 1st day of March, 1915, about 800,000 pounds. The situation was causing me the greatest anxiety. I felt that we would bo able to make good, but we were not making good. The officers of the company were ail anxious about the situation. I will say that on the 1st of April we were still further behind, and it was not until the latter part of May that we caught up with our orders. The situation, therefore, about the 1st of March, 1915, was one of keen anxiety, and I felt that anxiety perhaps as much as anybody in the company, because it was upon my department that the chief burden was placed.
“Q. You say you were behind in the deliveries. Was that behind in deliveries under the contracts? A. Under the contracts. We were behind contract requirements.
“Q. And did not catch up until May of 1915? A. Eight.
“Q. Am I right or wrong in that? You overtook your contracts about what time? A. It was not until the latter part of May, 1915, that we caught up with our contracts.
“Q. Was there any question involved in the problem about making deliveries, even if you manufactured the goods? A. We were keenly anxious at that time about the uncertainty whether these new men could he taught, and whether or not the use of this tremendous number of new men would involve an accident risk far beyond what we had ever had before. In other words, them was grave uncertainty whether or not, even if we manufactured this powder, or started to manufacture it, that in the process wo might be involved in a calamity, owing to the inexperience of these men. Wo had plenty of accidents under normal conditions, hut under those abnormal conditions I feared that some calamity might, easily be possible. In the next place, I recall very distinctly that we were very anxious in regard to whether or not we would be permitted to ship the powder after we had made it. I remember that prominent men in and out of Congress were clamoring for an embargo to be placed upon shipments of explosivos, and I think many of us felt very uncertain whether or not we would be permitted to ship this powder out of the (wintry after we had made it. That was another element of uncertainty in the situation.”
In view of these conditions, Mr. Brown, a director, voted against the acquisition of the stock by the company, and as his reasons therefor he testified as follows:
“A. I voted against that because I considered that the purchase of that stock by the company would be a highly speculative proposition. I considered it would be highly speculative for the reasons I have already named in my previous answer. I was very well familiar with the circumstances attending the Ailing of these enormous war orders at that time, and I considered that the future was highly speculative, that the profits on these war orders had not been made, and that it was absurd for the company to pay at that time $200 per share for its common stock in the purchase of this stock from P. S. Du Pont and his associates.”
The reasons which William Coyne, another director, gave as influencing his vote against the purchase, were:
*180 “A. I had quite a number of reasons. The most powerful one was the highly, as I considered it then, speculative value placed upon the stock of $200— the uncertainty that was in my mind about our ability to fulfill those large contracts in the contract period. As I recall it, we never made more than 6,500,000 pounds of military powder in a year before, and we were then called upon to make seven or eight times that much. A number of green men had to be trained. A number of engineering men had to be trained to make our machinery and build our plants. The time, which was of the essence of practically all the contracts. The return of the advance payments in the event of our being unable to fulfill the contracts.
“Q. Did you know of any bonds for return of advance payments? A. Yes; I knew that in case of the Russian powder orders we had to put up a bond to return the advance payment in the event of our not fulfilling the contract. Then I felt that there might be some embargo placed upon the exportation of explosives, and a very important factor in forming my opinion was my experience with the Lake Superior Company. I was with that corporation prior to my coming with the Du Pont Company in 1904, and some time prior to my going with the Lake Superior Company its officers and directors had purchased large blocks of its common stock, which had depreciated very much in value after the purchase, causing the company great loss, and there was quite an international scandal about it, and threatened suits against all the officers to make them recoup the company.”
Eammot Du Pont, a member of the purchasing syndicate, testified as to his reasons for opposing the Powder Company buying, as follows;
“Q. What were your reasons for voting against making the offer? A. As X remember at that time, I had several reasons. I think the principal one was that so far as I could see there was no reason why the company should buy the stock. The chairman of that meeting had asked for reasons why the company should offer to buy the stock, and no rational reason for doing so was presented. I knew of no reason, and I thought that it was pretty good policy not to pay out a large sum of money like that without having a reason for doing so.
“Q. Did the question of purchasing such a large block of the company’s own stock by the company itself enter into your consideration? A. I thought it was an unwise thing to do, because the value of the stock at that time was very largely speculative. I thought that it was an unwise thing for the company to speculate in anything apart from its own business, that of manufacturing and selling explosives.”
Eugene E. Du Pont, who occupied the same relation, testified to his reasons for opposing the purchase by the company of the Coleman stock, as follows:
“Q. Will you kindly state some of the reasons, or any of the reasons, that influenced you to vote against the acquisition of this stock? A. My main reason for voting against it was that I considered it entirely too speculative. I considered that the Du Pont Company had been earning for their stockholders, through the legitimate manufacture of powder, not through any speculation in their own stock. I considered that the earnings of the Du Pont Company should bq made in the legitimate 'manufacture of powder and not through speculation in its own shares of stock in any way. I considered that that has been the policy of the company for nearly the last 100 years; and X saw no reason why we should deviate from that policy. Furthermore, I did not hear in that meeting amg logical argument for the purchase of the stock. Those were my two main reasons for voting against it.”
The testimony of E. G. Buckner bears largely on phases of the situation not touched on by other witnesses. Buckner negotiated large war contracts with foreign governments. He insisted on and obtained.great payments in advance from these governments when the contracts were *181 made — a policy which aided in financing the vast outlays in buildings, raw material, and equipment necessitated by these contracts over normal conditions. Apart from the policy of a company buying its own stock, Buckner’s view was that such a course would result in the Powder Company being unable to get any advance payments on contracts thereafter. His testimony in that regard was:
“Q. Please state to the court what your reasons were for voting against that resolution. A. To begin with, I was very much opposed to the proposition from every standpoint. I did not believe that it was a proper thing for the company to do under the conditions that existed at that time. I _ Celt that it would be a great mistake for the company to invest any of its capital in its own stock. Iteally, T was opposed to the matter on principle. I did not believe that it was a proper thing for a director, or for a board of directors, to do, to unite in purchasing its stock for speculation under the conditions that existed at that time, or under any conditions almost that you might suggest to me, I think I should have been opposed to it. I have never been in favor in all my life, in any institution that I have been associated with, of its buying and speculating in its own stock. I believe that it was bad practice, and I believe have got the support in that belief of many of the Legislatures throughout the country who have legislated against it. I think it is a dangerous practice, and would have been opposed to doing it if there were no other grounds than that; but there were other reasons at this time that made me feel that it was unwise for us to buy our own stock. The suggestion had been made that we had plenty of money up to that time. Up to the time that this proposition came before the board, this company did not have any great surplus o£ money. We had liabilities, many of them. We had a large amount of indebtedness in the; shape of bonds, and at no time had we ever felt that we had more money than we wanted, and that there was any occasion to reduce our capital stock. That being true, I did not feel that it would bo right for us at this time to take the money that had been paid to us by these nations that had bought powder from us, and to invest it in tlfis purchase. Being as I was associated with those people in selling them material, I had realized how difficult it was to obtain advances. They had opposed it for several months, paying us this great cash advance. They wanted us to take it in other ways of security. They wanted to deposit it in bank, and have it paid over to us after we' had fulfilled the contract; but I had made them understand that this was their war, that we could make them powder, that we would make them powder if they would assume all the risk there was in the manufacture of it, and so I insisted that they must pay us this 50 per cent. They had finally agreed to it, and had been trading on that basis. I felt at this time that, if the board of directors exhibited any such spirit towards the investment of that money, that had been paid to us to build plants mid buy rato material, that if we undertook to use that money in the purchase of this stock, that it would at once stop my ability to sell powder. Wle would have found an opposition towards paying us tiiis money to be used in that way, and I thought that, if we went into such a transaction as the one that was proposed here, I might as well stop trying to sell powder, and I really believe that, had we done it, those people would have said to us, ‘We are unwilling to pay you this cash advance,’ and our business, instead of being the enormous business that it is to-day, in my judgment would have stopped at that time.”
As we have seen, some of the testimony which has been quoted above referred to the speculative character of this stock as an element in inducing them to object to its purchase by the company, but none of the witnesses testified to certain extraordinary conditions affecting this company’s future, which made the stock of the company of speculative value, utterly different from that of the ordinary manufacturing company in ordinary times. We have seen how in December its largest stockholder, Coleman Du Pont, regarded the stock as worth $200, *182 while Alfred I. Du Pont regarded it as worth substantially $125, and we shall see that by the end of the year the phenomenal fluctuation in value .of the stock was far distant from the views of either of these men. It is to some of the uncertain elements on which the value of the Powder Company’s stock depended, Mr. Buckner refers in his testimony :
“Q. What were the hazards and risks that you considered at that time in giving your vote as you did? A. We had sold all of the output of the plants that we had constructed. There was no doubt in my mind but that we could manufacture that powder from the plants that we then had in existence with the men that we then had employed, and had had for years, and with the organization that then existed; but the minute that we started beyond that, and commenced to sell the other 54,000,000 pounds, there was a hazard wrapped about that, that was very uncertain. In the first place, we had: no plants. We had to go to untried manufacturers of machinery, of construction work, building, and depend upon them to supply us with this material for the construction. That was an immense undertaking. We had only allowed ourselves in the contracts 5 to 6 months to begin deliveries, and these goods we had to give to untried people, and had to rely upon untried people to supply us with this construction material, and we then had to rely upon the manufacturers of raw material. There was a question of railroad facilities. We had to depend upon the railroad people much to get this material to our plants, and you must bear in mind that the time was very limited that we had to do this in. Then the question of labor, to obtain men to make this powder. We had sold all the capacity we had, and for all t

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/8811001. Public record. Not legal advice.